Exclusive: One in four hospital trusts routinely pay suppliers late

Thirty three trusts paid fewer than half their invoices on time last year

Suppliers have threatened trusts with legal action

NHS Improvement says relationship between trusts and suppliers ‘is a matter for the individual provider’

More than a quarter of hospital trusts are now routinely delaying payments to their suppliers because of cash flow problems, analysis by HSJ reveals.

Data collected from annual reports since 2014-15 shows a threefold increase in acute providers paying more than half their invoices late, with dozens of trusts reporting a steep rise in late payments.

East Kent had the biggest drop in performance for paying invoices on time

HSJ obtained data from the annual accounts of 122 out of 136 acute trusts, looking at the percentage of non-NHS invoices paid within 30 days.

It showed 33 trusts paid fewer than half of their trade invoices on time last year, up from 23 in 2015-16 and 11 in 2014-15 (see table).

Contract regulations mean public bodies are legally required to pay invoices within 30 days, with their performance measured under an indicator called the Better Payment Practice Code. Trusts should pay at least 95 per cent of their non-NHS invoices within this timeframe.

The regulations were introduced after concerns late invoice payments were often a major cause of insolvency for small and medium sized companies.

Hospitals rely on a huge range of private suppliers to maintain operations including companies supplying vital drugs and medical equipment.

Several trusts confirmed some suppliers have put their accounts “on stop” and refused to deliver further supplies because of late payments.

Meanwhile, finance directors at two trusts told HSJ they have been encouraged to delay payments to suppliers by NHS Improvement during discussions about cash support. NHSI said it had not issued any “specific guidance or instruction” on the subject.

The Department of Health has said “does not endorse” any delayed payments by trusts.

Performance declined at 74 trusts last year and improved at 37, with the rest reporting no change. The average proportion of invoices paid within 30 days was 67 per cent in 2016-17, 73 per cent in 2015-16 and 79 per cent in 2014-15. Fourteen trusts managed to pay 95 per cent of their invoices on time last year.

Under the Late Payment of Commercial Debts (Interest) Act 1998, suppliers can claim statutory interest of 8 per cent on valid and undisputed invoices not paid within 30 days, but it appears this is rarely applied in practice.

The sector’s reported income and expenditure deficit reduced dramatically last year, from £2.5bn to around £800m, but experts warned the real underlying position is likely to be a deficit of £3.7bn.

Colchester paid the fewest number of invoices within 30 days

The head of analysis at NHS Providers, Phillippa Hentsch, said: “It’s important trusts pay their bills on time. They understand the need to comply with the BPPC and the importance of maintaining good relations with suppliers.

“But when the cash flow becomes extremely tight and other options – including interim support – are not available, this is one of the things that somewhat inevitably gives, however hard trusts try.”

She also pointed to late payments from an “increasingly pressured commissioning system” and delays in STF payments, and added: “We need to be careful about blaming trusts when large elements of this are beyond their control.”

An NHSI spokesman said there has been “no specific guidance or instruction to trusts” around invoice payments. He added that the “relationship between NHS providers and those who supply them is a matter for the individual provider”.

In a letter to the public accounts committee earlier this year, David Williams, director general of finance and group operations at the DH, said the department has been monitoring the situation with NHSI and is committed to tackling “late and unfair payment practices in the public sector”.

He added: “Trusts know their obligations under the Better Payment Practice Code and, whilst we are aware that some trusts have stretched payments to creditors, the department does not endorse this approach and does not support extension of credit terms beyond 30 days.”

Some of the worst performing trusts said they had managed to avoid legal action or supplies being halted by taking a proactive approach with suppliers and agreeing a longer period for payment. Colchester Hospital University FT, Lewisham and Greenwich Trust and Cambridge University Hospitals FT said there were no cases of suppliers stopping deliveries or taking legal action.

However, others said late payments have caused problems. Simon Sheppard, director of finance at Rotherham FT, said: “We continue to manage our supplier relationships on a daily basis and while none of our suppliers have threatened legal action, some have temporarily stopped our account. These actions have had no impact on our ability to provide goods or services.”

West Suffolk FT said: “Unfortunately there have been a small number of occasions where the trust has been placed ‘on stop’. Any issues or delays are always addressed as a matter of urgency and have been resolved as quickly as possible.”

Andrea McGee, director of finance at Warrington and Halton Hospitals Trust, said: “In the period quoted the trust has had its account put ‘on stop’ and has been threatened with legal action for non-payment by a small number of suppliers.”

Lee Bond, chief financial officer at Hull and East Yorkshire Hospitals Trust, said: “We have had issues with suppliers regarding the possibility of legal action or the future supply of goods in the past. However, we have always managed to resolve the issues because of our relationships with our suppliers and they understand our difficult cash position.”

A spokeswoman for Hillingdon Hospitals Foundation Trust said: ”The trust faced considerable challenge in 2016-17 achieving its financial plan and it under delivered on its savings programme. The trust’s surplus was only achieved through non cash measures that caused a deterioration in the trust’s liquidity. The position remains challenging in 2017-18, though we have increased the value of non-NHS invoices being paid within the BPPC requirement to approximately 50 per cent.”

The other trusts in the table below did not respond in time for publication.

Thirteen trusts did not report their BPPC performance in their annual report, while at least two – Stockport FT and University Hospitals Bristol FT – are reporting performance against a 60 day target instead.

Trusts that paid fewer than half their invoices on time in 2016-17

Trust

% of invoices paid within 30 days (by number) 2016-17

% of invoices paid within 30 days (by value) 2016-17

Colchester Hospital University FT

13

50

Walsall Healthcare Trust

15

52

Lewisham and Greenwich Trust

16

63

Hillingdon Hospitals FT

17

41

East Kent Hospitals University FT

18

52

Harrogate and District FT

18

52

University Hospitals of Leicester Trust

19

62

Cambridge University Hospitals FT

19

Not reported

Derby Teaching Hospitals FT*

20

50

Western Sussex Hospitals FT

22

49

Hull and East Yorkshire Hospitals Trust

23

27

Great Western Hospitals FT

25

57

Heart of England FT*

Not reported

25

Queen Elizabeth Hospital King’s Lynn NHS Foundation Trust

25

30

The Rotherham NHS Foundation Trust*

25

Not reported

Barking, Havering and Redbridge University Hospitals NHS Trust

25

56

East Sussex Healthcare NHS Trust

26

38

Northern Lincolnshire and Goole Hospitals FT

30

24

Warrington and Halton Hospitals FT

30

55

Airedale FT

33

59

Princess Alexandra Hospital Trust

33

45

Wye Valley Trust

34

61

Brighton and Sussex University Hospitals Trust

35

50

Royal Free London FT

36

44

Kingston Hospital FT

37

49

Blackpool Teaching Hospitals FT

37

58

Bolton FT

38

62

East and North Hertfordshire Trust

39

32

Croydon Health Services Trust

39

49

South Tees Hospitals FT

42

61

Mid Cheshire Hospitals FT*

43

68

West Hertfordshire Hospitals Trust

45

41

West Suffolk FT

45

57

* Trust reported the proportion of total invoices paid on time, as opposed to non-NHS invoices.

Top invoice payers in 2016-17

Trust

% of invoices paid within 30 days (by number) 2016-17

% of invoices paid within 30 days (by value) 2016-17

Northampton General Hospital Trust

99

98

University Hospitals Birmingham FT

99

99

Weston Area Health Trust

97

97

Dudley Group FT

97

99

South Tyneside FT

97

96

The following trusts did not report their BPPC performance:

Hampshire Hospitals FT;

King’s College Hospital FT;

Doncaster and Bassetlaw Hospitals FT;

Kettering General Hospital FT;

Basildon and Thurrock University Hospitals FT;

Burton Hospitals FT;

City Hospitals Sunderland FT;

Tameside and Glossop Integrated Care FT;

Barnsley Hospital FT;

Calderdale and Huddersfield FT;

Medway FT;

North Tees and Hartlepool FT;

Northumbria Healthcare FT; and

University Hospital of South Manchester FT.

Contracts held by NHS organisations for the provision of health care services under the NHS (Procurement, Patient Choice and Competition) (no. 2) Regulations 2013 are governed by different payment rules. However, these contracts are typically let by clinical commissioning groups and NHS England.

The longevity of models such as LIFT demonstrate that, done correctly, PPPs offer a flexible and sustainable environment for dynamic services, at a time when GPs are less inclined to buy into career long partnerships. By Chris Whitehouse